The Volatility Character of European Renewable Energy Stocks: A Study on the ERIX Index

Şahnaz KOÇOĞLU

Fiscaoeconomia, 2024, issue 1

Abstract: Renewable energy is a key sector in combating climate change and ensuring energy security. By the 2020s, more than 20% of the total energy consumption is from renewable sources and the European Union plans to phase out fossil-based energy production completely. For this purpose, renewable energy companies play a key role and the financial performance of renewable energies must be well understood. The aim of this study is to reveal the volatile character of the functioning of renewable energy companies in the European Union. ERIX (European Renewable Energy Index), which consists of the largest renewable energy companies, was used to analyze renewable energy in Europe. GARCH (1,1), TGARCH, and EGARCH models were used to examine the volatile character of the index. As a result of the study, it has been found that historical data can be used to predict the financial performance of European renewable energy companies. As a result of the GARCH(1,1) model, It was concluded that shocks occurring today have a long-term impact on future variance estimates. TGARCH model reveals that bad news has a greater volatility effect on the ERIX index and good news has less impact. The EGARCH model also shows that the shocks caused by good news and bad news are asymmetric. This study was the first to approach the renewable energy index as financial data and perform volatility analysis.

Keywords: Renewable Energy; Stock Market; ERIX; GARCH Models (search for similar items in EconPapers)
JEL-codes: G30 Q42 Q43 Q48 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:fis:journl:240105

DOI: 10.25295/fsecon.1362815

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